The difference between the maximum amount a person is willing to pay for a good and its current market price is known as Question 4 answers | | consumer surplus / |
| | the substitution effect |
| | profits |
| | marginal utility |
/

Which of the following is NOT a property of an indifference curve? Question 5 answers | | An indifference curve is convex to the origin / | | | The consumer is indifferent between any two points on an indifference curve / | | | The marginal rate of substitution diminishes as you move down the indifference curve | / | | As you move from one indifference curve to another indifference curve closer to the origin, utility increases |

An indifference curve is Question 6 answers | | the set of all points of consumer equilibrium as the consumer’s income changes / | | | the set of all goods that the consumer can afford given her income and the prices of the goods / | | | all combinations of goods X and Y that yield the same total utility / | | | all combinations of goods X and Y that yield the same marginal utilit |

As long as indifference curves are convex to the origin, utility maximisation will take place Question 7...

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Demand for Labor Increased
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...10K 2629
DATE: 29th/November/ 2010
SUBJECT: Consumer behavior and Marginalutility
We present our report on “CONSUMER BEHAVIOR AND MARGINALUTILITY” that was assigned to us. This report provides information related to rational behavior of individual and utility of individual
This report is divided into some parts, such as the INTRODUCTION. This part gives the overview. Second heading is CONSUMER BEHAVIOR. It consists of definition and we have also explained its ASSUMPTIONS in the third heading .The fourth part give the information about UTILITY. The fifth and sixth part explains the topic with the heading TOTAL UTILITY AND MARGINALUTILITY respectively. After that in the seventh part we have discussed the LAW OF DIMINISHING MARGINALUTILITY. We have also explained UTILITY MAXIMAIZATION RULE AND APPLICATION in the third last and second last part, and the last part focuses on the CONCLUSION.
Table of Contents
Executive summary …………………………………………………………………………………………………………………….5
1.Introduction 6
2.Consumer behavior 6
6. Utility ………………………………………………………………………………………………………………………………………...9
7. Total utility …………………………………………………………………………………………………………………………………9
8. Marginalutility...

...
Utility Maximization and the Demand Curve
Utility maximization rule
Utility maximization rule refers to the maximum satisfaction consumers have while spending their money. It indicates that the money from the income should be allocated in such a way that even the last money of the income spent should yield maximum utility. The marginalutility of each of the money spent should be equal to each product the consumers buy.
The theory of consumers’ pattern of buying uses the law of diminishing marginalutility, it explains on how the consumers allocate their income. The utility maximization model is based on some assumptions, they are:
• As the consumers income is limited due to limited resources so they face a budget constraint.
• Consumers are believed to be rational, trying to make the most use of their income.
• All the commodities have price tags and consumers should buy alternative goods according to their income.
• Consumers have clear choices of the goods they want to buy and the services that they want to avail thus, they know the marginalutility of the units of products.
Deriving the demand schedule and curve
Demand schedule and demand curve in economics represent the relationship between the price and quantity demanded that can satisfy all types of entrepreneurs. Both state the relationship between the...

...consumer from the point of view of Utility Theory.
As consumers, we are constantly forced into making choices. They face a variety of goods and services which can be purchased, but often are limited by the amount of money with which those purchases can be made. The utility theory, also sometimes referred to as the consumer behavior theory, is often used to explain the behavior of individual consumers and the amount of satisfaction a consumer derives from the consumption of goods and services. The theory of consumer behavior explains how people can best utilize their resources to achieve the highest level of satisfaction possible. According to Mr. Hirschey, the utility theory hinges on three basic assumptions: First, more is better, is described as consumers preferring more of a particular good or service. The second is that consumer preferences are complete, which allows the consumer to prioritize the assumed benefits of consumption. Finally, preferences are transitive, which enables the consumer to make a decision based on the desirability of consumption of a particular good or service. All of these assumptions help businesses gain a better understanding of the consumer they wish to attract, while providing economists and those that study consumers a better understanding of the habits of consumers. There are a several other concepts of importance that are observed; the first approach is the marginal...

...﻿Basic Assumptions of MarginalUtility Analysis.
Marginalutility analysis is based on a few basic assumptions. The following are the main assumptions:—
(i) Cardinal Measurement of Utility: It assumes that utility can be measured and the exact measurement can be given by assigning definite numbers such as 1, 2, 3, etc. It means that utility is a quantifiable entity. For example, a person can express the satisfaction derived from the consumption of a commodity in quantitative terms. He can say, for instance, that for him the first unit of the commodity has utility equal to 10, the second unit 8, and so on. Utility is usually measured in imaginary units.
(ii) Utilities are Independent: Marginalutility analysis assumes that the utilities of different commodities are independent of one another. That is, the utility of one commodity does not in any way affect that of another. In other words, the satisfaction desired from the consumption of one good is the function of that good alone and is not affected by the consumption of another. Thus, according to this assumption, the utilities of various goods are additive.
(iii) Constant MarginalUtility of Money: It assumes that the marginalutility of money remains constant...

...below: LO1
a. At which rate is total utility increasing: a constant rate, a decreasing rate, or an increasing rate? How do you know?
b. “A rational consumer will purchase only 1 unit of the product represented by these data since that amount maximizes marginalutility.” Do you agree? Explain why or why not.
c. “It is possible that a rational consumer will not purchase any units of the product represented by these data.” Do you agree? Explain why or why not.
Answer: Missing total utility data, top – bottom: 18; 33. The missing total utility for the second unity can be found by adding the marginalutility (change in utility) to the total utility for the first unit. By consuming the second unit, 8 more units of utils are added; thus total utility is 18 (= 10 + 8). Missing marginalutility data, top – bottom: 7; 5; 1. The missing marginalutility values are found by subtracting the total utility for the previous unit consumed from the total utility of the unit with the missing value (the change in utility). The marginalutility for the third unit is 7, which equals 25 (total utility for the third unit) minus 18 (total utility for the second unit).
(a) A decreasing rate; because...

...LAW OF DIMINISHING MARGINALUTILITY:
The law of diminishing marginalutility describes a familiar and fundamental tendency of humanbehavior. The law of diminishing marginalutility states that:
“As a consumer consumes more and more units of a specific commodity, the utility from the successiveunits goes on diminishing”.
Mr. H. Gossen, a German economist, was first to explain this law in 1854. Alfred Marshal later onrestated this law in the following words:
“The additional benefit which a person derives from an increase of his stock of a thing diminishes withevery increase in the stock that already has”.
LAW IS BASED UPON THREE FACTS:
* The law of diminishing marginalutility is based upon three facts. First, total wants of a man are unlimitedbut each single want can be satisfied. As a man gets more and more units of a commodity, the desire ofhis for that good goes on falling. A point is reached when the consumer no longer wants any more units ofthat good.
* Secondly, different goods are not perfect substitutes for each other in the satisfaction ofvarious particular wants. As such the marginalutility will decline as the consumer gets additional units ofa specific good.
* Thirdly, the marginalutility of money is constant given the consumer’s wealth.The basis of this law is...